Omicron fears looming over bourses

Spooked by the hawkish stance of US Fed and other central banks like Bank of England (BoE), sustained selling from FIIs, shadow of Omicron across the world and negative global cues; the domestic markets corrected sharply during the week ended. The BSE Sensex tanked 1,775 points to close at 57,012 points, and the NSE Nifty plunged 526 points to close below the crucial 17,000 mark at 16,985.20 points. The broader markets also followed the same trend as the BSE Midcap and Smallcap indices declined 4.5 percent and 2.75 percent respectively. FIIs net sold Rs 10,452 crore worth of shares in the cash market during the week, continuing selling for the 23rd day on December 17. On the other side, DIIs have supported the market with net buying of Rs 6,341 crore worth of shares.

It is known fact that most of the FIIs tend to lie low during Christmas holiday season. Omicron seems to be an increasing risk worldwide as media reports indicated that the new variant has now spread to 89 countries including India. Experts feel if the Omicron cases continue rising then that could be a major risk for the economy as the Covid restrictions might get increased again, though the overall coronavirus situation is under control. Markets will also be focused on the spread of the Omicron for the next few weeks. In the absence of any major domestic cues, near term direction of the markets will be dictated by developments around new Covid variant Omicron, rupee movement and global cues. Coming week will see few new listings - Shriram Properties, MapmyIndia, Metro Brands, MedPlus Health Services and Data Patterns.

However, the recent tepid listings of RateGain Travel, Star Health and profit-booking in Tega Industries might weigh on the sentiments for these listings.

Market Musings: Bull markets give, and they take away. One of the most valuable assets erased by this bull market is the distinction between risk taking and risk seeking. You can't invest at all without taking any risk. Even if you keep 100 per cent of your bank accounts insured by GoI, that isn't risk-free. You run the very real risk that, at today's paltry interest rates, the income you earn won't maintain its purchasing power. Net of inflation, you are highly likely to lose money. That's an involuntary risk, one that no investor in those assets can avoid. A long bull market, however, goads many investors into taking voluntary risks. They seek bets they don't have to make. The NSE Nifty and the BSE Sensex closed at new all-time highs so many times so far this year, making it seem almost as if the market will never go down again and even if it corrects sometimes it will pull back to new highs.

And people often take more risk when the environment around them feels less risky. You probably feel safer riding your two wheeler fast if you're wearing a helmet. You'd be more inclined to take curves on a mountain road at high speed in a sturdy SUV than you would in a compact car. In much the same way, the low-interest-rate policy of the US Federal Reserve and other central banks around the world has made the market environment less risky—thereby prodding investors into behaviour that's more risky. Now that the US Federal Reserve and other central banks across the globe have signalled the increase of interest rates in next few months, it should be understood that the days of loose monetary policies is over. We see the past through a rear-view mirror made of rose-coloured glass. Ask whether it's a risk you understand. Who's on the other side of this trade, and why are they willing to let you make money? In a severe bear market, you're often trading with someone who has to get out or go broke so you may have the advantage. In a bull market, it's often someone who knows more than you do. You have to take risks. You don't have to seek them, especially when ever-rising prices make the market riskier than it feels.

F&O / sector watch

Tracking the underlying weakness in the cash market, derivatives segment witnessed aggressive selling during the week ended. Continuous FII selling has triggered nervousness and fresh addition of short positions. Nifty breached psychological level of 17000 mark, while Bank Nifty tumbled below 36000 mark. On the option front, Maximum Call Open Interest (OI) was seen at 18000 strike, followed by 17300 &17500 strikes. Maximum Put OI was seen at 17000 strike, followed by 16000, 16500 & 16000 strikes. India VIX was up by 1.74 per cent from 16.06 to 16.34 levels on a week- on-week basis.

Sectorally, barring IT, all other sectors witnessed selling pressure. Weak rupee and good results from global IT services major Accenture triggered fresh buying in large cap IT counters. Industry observers expect good Q3 earnings from frontline IT companies TCS, Infosys, HCL Tech and Wipro.

Stay invested in the sector for present. Sustained selling from FIIs further continued to hurt the sentiment in the banks and financials. Contrarians advise buying in low priced PSU banks. Most of the PSU banks have reduced NPAs in the last few months and are on good recovery path. With the receipt of dues from Vodafone, IDFC First likely to report very good Q3.

Accumulate in the current weakness for target price of Rs65 in next couple of months. Stock futures looking good ABFRL, L&T Tech, Infosys, HCL Tech and Wipro. Stock futures looking weak are IEX, PVR, TVS Motors, M&M, RIL and Tata Steel.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)